China Stock Market May Test Resistance At 2,400 Points

4/24/2012 8:51 PM ET

The China stock market has alternated between positive and negative finishes through the last five trading days since the end of the two-day slide in which it had fallen more than 25 points or 1 percent. The Shanghai Composite finished just below the 2,390-point plateau, and now investors are looking for the market to extend its gains when it opens on Wednesday.

The global forecast for the Asian markets is mixed with a positive bias, with much stronger than expected earnings news from Apple outweighing soft U.S. economic news. The Commerce Department reported that new home sales fell in March but still came in well above estimates. Also, the Conference Board showed that U.S. consumer confidence was virtually unchanged in April. The European markets were higher and the U.S. bourses were mixed, and the Asian markets figure to split the difference.

The SCI finished flat on Tuesday with losses from the metal stocks and technology shares limiting support from the broader market.

For the day, the index collected 0.25 points or 0.01 percent to finish at 2,388.83 after trading between 2,350.40 and 2,415.75. The Shenzhen Composite Index lost 8.36 points or 0.9 percent to end at 936.51.

The lead from Wall Street is inconclusive as traders were reluctant to make any significant moves ahead of the Federal Reserve's monetary policy announcement on Wednesday. The Fed is widely expected to leave interest rates at near-zero levels, but traders will pay close attention to any comments regarding the outlook for further quantitative easing.

A mixed batch of economic data also weighed, with the Commerce Department reporting that new home sales fell 7.1 percent to an annual rate of 328,000 in March from an upwardly revised February rate of 353,000. Despite the drop, sales came in above estimates for a rate of 318,000.

A separate report from the Conference Board showed that U.S. consumer confidence was virtually unchanged in the month of April. The Conference Board said its consumer confidence index edged down to 69.2 in April from a downwardly revised 69.5 in March. Economists had expected the index to slip to 69.7 from the 70.2 originally reported for the previous month.

Among individual stocks, tech giant Apple (AAPL) closed in the red, ending the day down by 2 percent ahead of the release of its fiscal second quarter results after the close of trading. However, after the bell, Apple said that its second quarter profit jumped 94 percent from last year, driven by strong sales of its iPhones and iPad multimedia devices. The company's quarterly earnings per share also breezed past expectations as did its quarterly revenue. The stock surged after hours.

On the other hand, shares of Netflix (NFLX) came under pressure after the company reported a narrower than expected first quarter loss but forecast slower subscriber growth for its U.S. video-streaming service.

The major averages closed on opposite sides of the unchanged line. The NASDAQ fell 8.85 points or 0.3 percent to finish at 2,961.60, while the Dow rose 74.39 points or 0.6 percent to end at 13,001.56 and the S&P 500 climbed 5.03 points or 0.4 percent to 1,371.97.

In economic news, the Conference Board's leading indicator of China's economic activity on Tuesday marked continued slowing of the economy, with significant downside risks remaining. The Conference Board's leading economic index increased 0.8 percent in March to 230.6, slower than 1 percent increase in February and a 2.1 percent increase in January.

Also, China will continue to prevent risks from property loans as well as risks from local government financing platforms, the China Banking Regulatory Commission (CBRC) said on Tuesday. Risks from real estate loans continued to decline in 2011, the commission said in its 2011 annual report.

The agency also said that the risks from the local government financing vehicles are currently under control. CBRC said it has built a "firewall" between the banking institutions and a "shadow banking." to prevent credit risks from growing.